Biden Administration’s New Mortgage Policy: Unjust and Dangerous
The comments below are an edited and abridged synopsis of an article by Andy Matthews
Incentivize good behaviour, and you’ll get more of it. But what happens when the incentive structure becomes inverted? That’s what’s happening in the US thanks to a new Biden administration policy effective May 1.
The new Federal Housing Finance Agency policy will force those with good credit scores to pay more for their mortgages each month, with those extra payments used to subsidize the loans of higher-risk borrowers. Homebuyers with credit scores of 680 or higher will pay roughly $40 per month more on a home loan of $400,000. Those who make down payments of 15 to 20% will be hit with the highest fees. It amounts to a tax increase on the middle class, and it’s atrocious in every way imaginable.
It is fundamentally unjust and absurd to impose a policy that punishes those who have acted responsibly, and who have sacrificed and worked hard for a secure financial future.
This policy is unfair and reckless. The painful 2008 financial crisis and mortgage meltdown showed us what happens when government encourages those who cannot afford a mortgage to take one anyway, and to undermine the critical role that credit scores play in assessing a prospective borrower’s risk level.
The administration defends its policy on the grounds that it’s trying to close a gap in house ownership between higher- and lower-income Americans. The administration also anticipates some political gain through what is merely the latest of its many wealth redistribution schemes.
The right way to accomplish this is by eliminating unnecessary regulations, reducing inflation and bringing down energy costs—not subverting basic market principles to political considerations.
If political advantage is what the Biden administration is expecting, they are in for a surprise. The more Americans learn about this new policy, the more they will be outraged and insulted that Biden would adopt a plan that punishes responsible behaviour and removes incentives to manage finances wisely.